Who are the worst rogue traders in history? | Business | The Guardian Banking Who are the worst rogue traders in history? From Jérôme Kerviel of Société Générale to Nick Leeson of Barings, we look at how unauthorised trading has cost major banks billions Rogue trader Jérôme Kerviel was found guilty and sentenced to three years in prison. Photograph: Joel Saget/AFP/Getty Images Share on Messenger Close That may be enough to ensure UBS makes a loss for its third quarter, the bank said, but it will not top the list of the worst rogue traders in banking history. That title belongs to Jérôme Kerviel, who lost Société Générale a staggering £3.7bn in 2008. Société Générale – £3.7bn SocGen revealed in January 2008 that a rogue trader had lost the bank £3.7bn. The trader was swiftly named as Jérôme Kerviel, then 31 years old, who had been taking unauthorised positions on stock futures, the bank said. A subsequent court case suggested Kerviel had been betting €50bn of the bank's money on the trades.

Kerviel said that the bank had turned a blind eye when his trades were turning a profit. Kerviel had worked in compliance, and bank bosses suggested he was adept at hiding his losses and bypassing checks. Kerviel was sentenced to three years in jail in October of last year , and told he must repay the money lost, a conviction which is currently subject to appeal. Coming in the midst of the banking crisis, the losses had surprisingly little impact on the market generally, with US losses from sub-prime mortgage lending dwarfing Kerviel's activities. Barings Bank – £827m The most famous 'rogue trader' in history, Nick Leeson brought down one of the grandest names in British banking . Working in Barings' Singapore office, Leeson initially made large profits for the bank by dealing in derivatives and futures. But after running up losses, he hid his bad trades in a single account in 1992. These losses grew over several years, forcing him into a series of increasingly desperate but unsuccessful attempts to make the money back. Leeson finally fled in February 1995 after a bet that the Tokyo stock market would rise went badly wrong.

Once the full scale of the losses became apparent, Barings was sold to Dutch bank ING for just £1. In the aftermath, Leeson's managers were criticised for giving him too much leeway. Crucially, he had been allowed to settle his own trades, letting him disguise his actions. In December 1995 Leeson was sentenced to six years imprisonment in Singapore, and was released in 1999. He subsequently ran Irish football club Galway United, and is now an after-dinner and conference speaker. Allied Irish Bank – £697m Friends and colleagues saw John Rusnak as a typical 'Mr Middle America', but the Baltimore-based trader was jailed after hiding trading losses of almost $700m (£355m) . He was hired by Allfirst Financial, a division of Allied Irish Bank, in the mid-90s as a dealer on the foreign exchanges. Betting mainly on the Japanese yen, Rusnak used fictitious options contracts to hide his losses over several years. Some outsiders suspected that all was not well, with Goldman Sachs reportedly refusing to do business with Rusnak.

But it took until 2002 before routine checks finally uncovered the true nature of the bank's exposure. By that stage, rather than sticking to his trading limit of $2.5m, Rusnak had secretly bet $7.5bn of AIB's money on the yen rising against the dollar. At his subsequent trial, prosecutors said he had created a false identity under the name David Russell and used an address in New York to send confirmations of false trades. Rusnak was jailed for seven-and-a-half years in a plea bargaining deal. Daiwa Bank – $1.1bn The president of Japan's Daiwa Bank received a particularly nasty shock on 13 July 1995 . Toshihide Iguchi, one of its senior US executives, confessed in a 30-page letter that he had lost $1.1bn through unauthorised bond trading. Like Leeson and Rusnak, Iguchi ran up the losses over several years. Having risen from the back offices to become a trader in 1984, a lack of segregation within his division meant he could hide his losses from his superiors while he tried, and failed, to trade back to profit.

Following his confession, it emerged that he had conducted the cover-up for over a decade, falsifying some 30,000 trading slips. Having once been seen as the golden boy of the department, in 1996 he was jailed for four years and fined $2.6m. In court, he told the judge that his life was filled with guilt, fear and deception after 11 years trying to recover his losses. Interviewed in jail, Iguchi said he had seen his earlier actions as merely a violation of internal rules. "I think all traders have a tendency to fall into the same trap. You always have a way of recovering the loss", he told Time magazine. Daiwa was also penalised heavily. The Federal Reserve ordered it to end all of its operations in America, leading to a sale of most of its US assets in January 2006. Sumitomo Corporation – $2.6bn Yasuo Hamanaka was jailed for eight years for fraud and forgery in 1997 after the one-time king of the copper market was found to have conducted rogue trading and fraud for more than a decade .

At the height of his power, Hamanaka was said to control 5% of the global copper market. His off-the-book trades forced prices up and generated large profits for years, but ultimately cost Sumitomo $2.6bn when the scandal was uncovered. A year after his conviction, Sumitomo paid about $150m to settle claims from British and US regulators. In 1999, Merrill Lynch was fined a total of £16m for helping to finance a copper trading scandal. The London Metal Exchange said it had provided the finance to clients to undertake actions that it should have known was the basis of an attempt to manipulate the market Other major trading losses Although actual fraud is rare, many other traders have run up huge losses simply through a bad call on the markets. These include Brian Hunter, an energy trader at hedge fund Amaranth. He had made large profits by speculating on natural gas prices, but ended up losing $6.6bn in 2006 after betting that the price of gas would rise. Unfortunately for him (but not for traders who took the opposite view), they plunged after a heatwave helped to slash the price of gas future contracts.

And Morgan Stanley's oil trader David Redmond risked $10m in a frantic series of trades following a drink-fuelled lunch. Redmond managed to recover most of the losses the next day, but was still banned from the City.

Former trader who lost Sociéte Générale £4.9bn released by appeal court after serving 110 days of five-year prison sentence Published: 4 Sep 2014 Trader faces charges including dishonestly falsifying a record of an exchange traded fund and false accounting, and is remanded in custody until next Thursday Published: 16 Sep 2011 UBS is expected to scale back its investment banking business as it races to protect its reputation following the arrest of one-time star trader Kweku Adoboli Published: 16 Sep 2011 Kerviel had threatened to remain in Italy in defiance of a deadline to return to France Published: 18 May 2014 Rogue trader costs UBS $2 billion - CNN.com Rogue trader costs UBS $2 billion By the CNN Wire Staff UBS reports $2 billion trading loss STORY HIGHLIGHTS UBS itself reported the rogue trader to police, officers say British media name the arrested man as Kweku Adoboli The loss could be caused by anything from fraud to "stupidity," an expert says It would be among the largest losses in unauthorized trading (CNN) -- A rogue trader has cost UBS an estimated $2

 billion, the Swiss banking giant announced Thursday, revealing what could be the third-largest loss of its kind in banking history.

A $2 billion rogue trading loss would be all but unprecedented, market analyst Ralph Silva told CNN. "We have only had three or four other situations... in the billions, and that is exactly what happened," he said. The bank is large enough to take a $2 billion hit, experts said. Shares in UBS were down 11% on the U.S. stock exchange at midday trading, though, even as European markets closed higher Thursday. Police arrested a man on suspicion of fraud in an early-morning operation in London's banking district hours before the loss was announced, they said. UBS suffers loss from unauthorized trade A history of big trading losses Past unauthorized traders cost billions RELATED TOPICS UBS contacted the police at 1 a.m. about an allegation of fraud, and a 31-year-old man was arrested at work two and a half hours later, police commander Ian Dyson said. British media named the suspect as UBS trader Kweku Adoboli, 31. CNN has not independently confirmed his identity, but was told when calling his desk at UBS that he was not available. The bank declined to comment on the arrest. News of the rogue trader comes amid pronounced economic anxiety in Europe.

Markets there have been in turmoil in recent weeks as concern has mounted that Greece might default on its huge debt, sending shock waves through the 17-nation eurozone and further afield. Just this week, the credit rating agency Moody's downgraded two French banks. On Thursday -- even as news was circulating of the incident at UBS -- came word that the Federal Reserve and four other powerful central banks announced they were throwing a lifeline to Europe's struggling banks. The European Central Bank, along with the Fed, the Bank of England, the Bank of Japan and the Swiss National Bank, said three U.S. dollar auctions would be held to help out European banks that need the currency to fund loans and repay debt. European banks have seen U.S. dollars flow out as U.S. financial institutions and money market accounts scale back exposure to European banks, amid fears over those institutions' exposure to debt held by Greece and other European nations. U.S. Treasury Secretary Timothy Geithner is to attend a meeting of Europe's Economic and Financial Affairs Council in Wroclaw, Poland, on Friday, at which questions around Greek debt and financial stability in the eurozone are bound to be discussed.

Finance ministers for the European Union member states, central bank presidents and representatives of other major financial bodies will also be present. The conference comes ahead of G20 and IMF meetings later this month. As to the episode at UBS, Silva, the analyst, outlined three possible ways a loss that big could take place: intentional fraud, "basic stupidity" in trading strategy, or what the banking industry calls "fat fingers," which means typing the wrong number by accident. Perhaps the trader "put in an extra zero so instead of buying a million he or she bought ten million -- could be a problem," Silva said. Lex van Dam, a former trader who is now a partner at Hampstead Capital in London, said chaos in the markets could have put more pressure on a trader desperate to hang onto his job. "Trading has been incredibly difficult over the last year," said van Dam. "With the volatility in banking stocks, commodities and currencies, things can go wrong really, really easily. If you're worried about your job and you try to hide (a mistake or loss), you can see how these situations arise." A bank's risk management division is supposed to examine a trader's activities, he said.

"He must have done something that he wasn't supposed to do, obviously," van Dam said. UBS said no client positions were affected by the loss, which is still being investigated. But the "unauthorized trading by a trader in its investment bank" could cause UBS to post a loss in the third quarter of this year, it said. The loss would potentially be among the largest costs ever to a bank in unauthorized trading. Rogue trader Jerome Kerviel cost his French bank, Societe Generale, almost $6 billion, and was sentenced to three years in prison last year. Yasuo Hamanaka cost Sumitomo Corporation $2.6 billion in the global copper market, and was sent to prison for eight years over fraud and forgery in 1997. Nick Leeson, the subject of the Ewan McGregor movie "Rogue Trader," lost about $1.3 billion for his bank, Barings, in 1995, forcing it to close. UBS is not likely to collapse, but the scandal could prompt the bank to split its investment bank into a separate company, van Dam said.

There is a "much higher chance that this bank will now be broken up" into a wealth managament firm and an investment bank to reduce clients' exposure to investment banking losses, he said. He favors that alternative, he said. "The banks are too large," van Dam said. "The products are so complicated, and the management doesn't understand it." UBS made a pre-tax profit of about $1.9 billion in the second quarter of this year, it announced in July, down from about $2.5 billion the quarter before that. CNN's Nina dos Santos, Irene Chapple, Ben Rooney, Alex Mohacs, James Partington, Laura Perez Maestro, Kendra Petersen, Nick Thompson and Christine Theodorou contributed to this report.

Share this on: Top French bank goes after rogue trader for billions lost - Yahoo7 Finance Australia Thu, Jan 19, 2017, 2:55 PM AEDT - Australia Markets close in 1 hr 5 mins Top French bank goes after rogue trader for billions lost AFP – Wed, Jan 20, 2016 2:08 PM AEDT Recommend View Photo French rogue trader Jerome Kerviel was jailed after a series of unauthorised trades cost Societe Generale 4.9 billion euros ($5.5 billion) in 2008 French banking giant Societe Generale launched a court bid on Wednesday to recover 4.9 billion euros ($5.5 billion) gambled away by rogue trader Jerome Kerviel through unauthorised trades in 2008. The French appeals court in Versailles, near Paris, said it would decide on January 29 whether to delay the proceedings pending the outcome of a separate bid by Kerviel, 39, for a retrial of the criminal fraud case that saw him sentenced to three years in jail.

At issue is the degree of responsibility that France's third largest bank bore in the affair, which could have bankrupted Societe Generale had Kerviel's trades not been discovered and unwound in time. His lawyer David Koubbi asked for a delay until after the Paris court's ruling, set for March 21. The retrial bid was bolstered by a bombshell revelation on Sunday that a former deputy prosecutor in the case had said it was "obvious" that Societe Generale was aware of Kerviel's shady dealings. A top detective in the case secretly recorded the Paris deputy prosecutor, Chantal de Leiris, saying in a June 2015 conversation: "When the subject comes up, anyone even a little bit involved in finance laughs, knowing very well that Societe Generale knew... it's obvious, obvious." Branded a crook by his ex-employer and a scapegoat by his defenders, Kerviel says his bosses turned a blind eye to his malfeasance as long as the profits kept rolling in. Societe Generale on Monday rejected what it called "pseudo-revelations" and a "new media manipulation" in the case.

The bank's lawyer Jean Veil dismissed as "nonsense" the idea that the bank knew of the rogue trading. It is "implausible that those directly above Jerome Kerviel or the people who worked with him every day knew but didn't say anything," Veil told AFP. He said Kerviel's colleagues would have no interest in covering up his risky manoeuvres for fear of jeopardising their bonuses, which depended on the performance of the team. Kerviel's conviction in 2010 of breach of trust, forgery and entering false data was upheld on appeal. He was also ordered to repay to Societe Generale the 4.9 billion euros he lost -- although an appeals court overturned the order, arguing that the bank's internal oversight mechanisms had failed. Kerviel left prison in September 2014 after spending less than five months behind bars. @y7finance on Twitter, become a fan on Facebook The Men That Broke Banks - Rogue Traders - ToTheTick™ The Men That Broke Banks - Rogue Traders tothetick 0 Comments July 4, 2013 An unprincipled, deceitful, unreliable scoundrel. A vicious and solitary animal.

An organism that shows a variation from the standard. What are we talking about? Rogue Traders! Does the cap fit? Some people ask why rogue traders still exist. But, that seems as if it’s an easy one to answer. Fool-proof risk management doesn’t exist and never will. At, least it won’t while the rogue traders are being covered by rogue managers. You see, the definitions at the beginning had one thing wrong. They are definitions of solitary, lone-wolves. But, even lone-wolves belong to a group. They just prefer to avoid the assistance of others in certain matters. The rogue trader’s pack is the howling, fierce management for which he works. Lone-wolves always have alpha members they take orders from, don’t they? Lone-wolves are sometimes excluded from the pack to protect that alpha-male, thus preventing ‘in-breeding’ in the pack. It’s exactly the same in the trading world of finance. The rogue trader is excluded from the pack, forced to work alone, shunned so that if caught, there will be no ‘inter-breeding’. The alpha-male manager won’t be caught and be brought down if the rogue falls!

But out of all the rogue traders that have come and often gone forever (only making a pitiful comeback living on their past as the conference giver, the ‘ guy that brought down X bank and Y stock-exchange’ ) there must be a reason why those guys actually do it. Here are some of the reasons: 1. Profit Self-worth can be tallied with profit and loss. Make it big and the rogue trader will have high esteem. Lose and he will hate himself. In both cases, the champagne will flow in ostentatious showy brashness, but with the highs the rogue trader will shout “this one’s on me!” Make a loss, and he will drown his sorrows. The level of profit is proportional to the size of their ego and to the size of the bonus that they will get handed. That bonus will be proportional to the size of the thought that they were doing the right thing. Rogue traders, when caught, have often said that they were not motivated by the gains. Do we believe them? 2. Greed Traders are allowed to think that amassing great quantities of wealth is good. Their intelligence is measured in doing so. Their daring courage is equated with the money they get.

But, their emotions are left on the side-line. They never come into play. They feed only on the greed that fuels their actions. Greed becomes an acceptable trait and human characteristic that is worth the effort. Boundaries are pushed. 3. Winner-Effect The market goes up and then it reaches a peak and drops. It’s cyclical. The winning streak that is experienced is cyclical too. The winner-effect has a big bad brother: the loser-effect. The winner-effect sees a show of testosterone pulse, aggressive behavior bringing about more wins, in an ascending cycle. The winner effect is a psychological impact on the brain. It leads to over-confidence and then mistakes are made. The brain feeds of the dopamine-linked betting against market fluctuations, underpinning pleasure. Success and winning mean that the brains production of cortisol (the stress hormone) removes the downers in people. The winner becomes self-assured, confident and in control. The ego is enhanced and that winning leads to drug-like addiction. Betting on the ups and downs of the market movements is the cocaine-snorted drug of the rogue trader. 4.

Double or Quits When things take a turn for the worse, the rogue trader has just a few options to him to get himself out of that trouble. Either he admits and comes clean. But, that will be hard after the ego boost that was the result of the winning streak. Self-esteem will be lost and the esteem of others. That will be psychologically hard to accept. If he comes clean, he will start a chain of events that will no longer be under his control. He will lose his job, become ‘the guy that brought down the bank’ and the one that ruins the investors. He will become public-enemy number one. That second option is he can use more money and try to right the situation. The winning streak will return, his brain has told him so, because he has no fear. Fear went when the stress hormones stopped being produced. The chances that the guy will become public enemy number one if he admits to everything are 100% . But, there is a fifty-fifty chance of losing and winning if he places more money on his losses. At least, that’s what he thinks. So, he chooses the second option; instead of calling it quits, he doubles and loses again.

So, who are the rogue traders that have experienced all of this? Here’s a small sample (the ones we know of!). They are not in chronological order but in order of how much money they actually lost their banks (from the lowest to the highest): 1. John Rusnak Rogue Trader: John Rusnak The guy that brought down the Allfirst Bank and incurred losses of $69.2 million. He was sentenced to 7.5 years in prison on January 17th 2003 for hiding the losses that he incurred as a currency trader. He hid the losses for a year. He is now under confinement at his home (since January 2009, meaning that he served almost six years for his rogue trading). He was ordered to pay back $1, 000 per month after his release from prison and despite the fact that he remains in debt to the full sum of $691.2 million he will probably never be able to pay it back. How did it all happen? Allfirst Bank wished to make its forex operations go from just hedging to bringing in a yield of profits and thus increase the total profits of the bank. John Rusnak was hired to do this.

Rusnak was bullish on the Yen . He believed that the Yen would not fall any more after the bursting of the Japanese bubble. He believed that the Yen would rise against the Dollar. He neglected to hedge his forward contracts believing that the Yen could not fail to rise. With the onset of the Asian crisis, the Yen fell. He thus entered false options into the systems to make it seem as if the positions were hedged. He also asked for more money from high brokerage accounts in order to try to win back the money that he had already lost. The management granted this to him and he invested even more money. Rusnak made a personal gain of $550, 000 in bonuses plus his salary. The losses only came to light when the bank asked for capital to be released and they realized that Rusnak had been working in the red all the time. Rusnak was fired from his position and along with him he brought down 6 senior executives for failing to detect the scam . One thing is for sure: Rusnak has kept his nose clean since getting out of prison and has managed to fall into relative anonymity. Nobody knows what he’s doing today for work. 2.

Toshihide Iguchi Rogue Trader: Toshihide Iguchi The guy that brought down the Daiwa Bank of Japan and incurred losses of $1.1 billion. Iguchi was a government bond trader in Japan who made 300, 000 unauthorized trades between 1983 and 1995. As early as 1983 he in fact lost $70, 000 but concealed this from his management for fear of losing his job. He wrote a thirty-page letter to his boss in 1995 explaining that the losses had just got bigger and bigger and that he was unable to do anything to rectify the situation. It seems strange however that for 12 years Iguchi was able to carry on regardless without any control or surveillance from anyone. Iguchi wrote three books when he was released from prison: The Dollar Conspiracy, My Billion Dollar Education and Confessions. But, he spent four years in prison and his $2.6 million in debts were eaten up by the royalties. He went back to live in Kobe, Japan. He started an English-language school there. 3.

Nick Leeson Rogue Trader: Nick Leeson The guy that brought down Barings Bank and incurred losses of $1.3 billion. Nick Leeson was a derivatives broker at Barings Bank (the oldest investment bank in the UK). The bank had been founded in 1762 and ceased to operate in 1995, when the Leeson scandal broke. Leeson was appointed general manager (futures markets) on the Singapore International Monetary Exchange in 1992. One interesting thing is that Leeson had already been refused a broker’s license in the UK due to reasons of fraud in his application. He obtained one in Singapore, however. Leeson was earning £50, 000 a year in 1992 and bonuses exceeded double that sum: £130, 000. He was undertaking unauthorized speculation on behalf of Barings, netting profits for the bank of up to £10 million (which was about 10% of their annual income). When things took a downturn he used an error account to try to rectify the losses. The account was the infamous number 88888. The account was used to hide his bad debts.

The losses were easy to hide since Leeson was working on his own and had no control from anyone. Losses in 1992 stood at £2 million. By 1994 they were at £208 million. Leeson placed a short straddle (a strategy that means that he sold a put and a call at the same time). Losses neared £827 million or $1.3 billion by 1995, when Leeson jumped ship leaving a little note just saying “I’m sorry”. The bank was declared bankrupt in February 1995. It was sold for a token £1 to the ING banking group. Leeson write two books when he got out of his six-year stint in prison. One of those books was turned into a film, Rogue Trader. He went back to school and got a degree in Psychology and now gives conferences. Whenever a rogue trader gets mentioned in the press, Leeson is there to tweet. 4. Kweku Adoboli Rogue Trader: Kweku Adoboli The guy that brought down UBS and incurred losses of $2.3 billion.

This guy is the most recent rogue trader to date, but only the second highest in terms of loss and debts incurred. He was a trader at the Swiss UBS bank and was charged on September 16th 2011 with fraud and false accounting. He was found guilty on 20th November 2012 and was sentenced to seven years in prison. On March 1st 2013, Adoboli appealed against the sentence. Adoboli’s salary and bonuses combined stood at £360, 000 before his arrest. Adoboli admitted during the trial that: He was trading in excess of limits. He was booking fake trades to hide behind. But, he also stated that this was in line with recommendations of the bank. He said that his colleagues knew of his hidden account and that his managers were aware of the losses and had pushed him to make sure that he recouped on them (all five of them were fired immediately). UBS was fined, however, the sum of £30 million when the City of London financial regulators (Financial Services Authority) decided that “UBS's systems and controls were seriously defective.

Failures of this type in firms of the size and standing of UBS not only damage the firms concerned but also wider confidence in the integrity of the markets and the financial system." UBS cut its investment side of its operations and trimmed the workforce by 10, 000 in 2012. 5. Jérôme Kerviel Rogue Trader: Jérôme Kerviel The guy that brought down Société Générale, and incurred losses of $6 billion. Keviel was a French trader. He was accused of breach of trust, forgery and unauthorized use of IT systems. He was earning bonuses of €60,000 along with a €74,000-salary (2006), which quite honestly is relatively little in the financial world . The bank that brought the case against Kerviel states that he was working without the authorization of his superiors and the bank had no knowledge of this whatsoever. He began creating fake trades as from 2006 (and he started working for the Société Générale in 2000). He is accused of having traded at levels that exceeded the market capitalization of the bank.

It certainly begs the question as to how it would be possible to trade at over the market capitalization of the bank without anyone at the bank actually finding out. Was he the scapegoat or the rogue trader of the SG? Apparently hundred and thousands of trades were carried out by Kerviel, hidden behind false hedge trades. Kerviel was charged on January 28th 2008 and his trial began on June 8th 2010. His sentence has been suspended while appeals are made. Kerviel got three years (five years with two years suspended sentence) in prison and was banned from working in finance for life. After his arrest in 2008 he was hired as an IT consultant for Lemaire Consultants and Associates (with a salary averaging at $1, 200 a month) as he appealed against the sentence. He also wrote a book called Trapped in a Spiral: Memoirs of a Trader. But, he was banned from making any profit from either books or films and has to hand over any royalties to the Société Générale.

Kerviel lost a court case today (July 4th 2013) in Paris in which he was demanding that there be independent experts to look into his case. That means the final sentence will be pronounced on 24th March 2014 and his fate will be sealed. In an interview he gave to French television July 4th 2013 on leaving the court he said that it was “impossible for him to be solely responsible for the $6 billion that had been lost”. Conclusions Some might say that the rogue trader should only limit the losses by taking the profits before they turn into losses, rather than continuing to take that second option of double or quits. The rogue trader should use tools of analysis rather than going with gut feelings and intuition. Intuition only works by a stroke of luck. They should not hide the trades that make losses and learn by their mistakes. All very easy to say, but harder to do! But, that would be reason talking, not the drug-addicted investment and playing the markets that stop them sleeping. Like wolves, traders establish territories that are greater than they really need to survive.

Just like the prey that tries to escape from the claws of the wolf, with the rush that ensues, the wolf pursuing it, the rogue trader attempts to catch up with his losses. This is the most critical stage of the trader’s hunt for profit. Once the prey is caught, the trader feeds excitedly, ripping at the carcass of the profit, tearing off chunks and bolting it down. The profit is nothing more than an ephemeral feed. When the losses set in, the lone-wolf trader usually avoids howling in the presence of the alpha-male or the dominant wolves in the pack, it would do no good to get caught. But, thankfully, there are whistleblowers that still exist to trumpet and proclaim loudly what has been going on and just how much has been lost in investments that turned sour. Why do you think rogue traders are incurring greater losses to their banks? The biggest rogue traders in history | Business | The Guardian European banks The biggest rogue traders in history From left to right: Nick Leeson of Barings Bank, metals trader Yasuo Hamanaka of Sumitomo Corporation of Japan, and John Rusnak, a trader employed by Allied Irish Bank.

Photograph: AFP/Getty images Thursday 24 January 2008 08.30 EST First published on Thursday 24 January 2008 08.30 EST Close Jerome Kerviel At nearly €5bn, the fraud uncovered at Société Générale dwarfs any previous example of a single trader running up massive losses. Kerviel was sentenced to five years in prison in October 2010, but his sentence was suspended. The former trader claims that his bosses at the French bank knew of his trading activities. Barings Bank - £827m The most famous 'rogue trader' in history, Nick Leeson brought down one of the grandest names in British banking. Working in Barings' Singapore office, Leeson initially made large profits for the bank by dealing in derivatives and futures. But after running up losses, he hid his bad trades in a single account in 1992. These losses grew over several years, forcing him into a series of increasingly desperate but unsuccessful attempts to make the money back. Leeson finally fled in February 1995 after a bet that the Tokyo stock market would rise went badly wrong.

Once the full scale of the losses became apparent, Barings was sold to Dutch banking giant ING for just £1. In the aftermath, Leeson's managers were criticised for giving him too much leeway. Crucially, he had been allowed to settle his own trades, letting him disguise his actions. In December 1995 Leeson was sentenced to six years imprisonment in Singapore, and was released in 1999. He is now the commercial director of Galway United. Allied Irish Bank – £697m Friends and colleagues saw John Rusnak as a typical 'Mr Middle America', but the Baltimore-based trader was jailed after hiding trading losses of almost $700m (£355m). He was hired by Allfirst Financial, a division of Allied Irish Bank, in the mid-90s as a dealer on the foreign exchanges. Betting mainly on the Japanese yen, Rusnak used fictitious options contracts to hide his losses over several years. Some outsiders suspected that all was not well, with Goldman Sachs reportedly refusing to do business with Rusnak. But it took until 2002 before routine checks finally uncovered the true nature of the bank's exposure.

By that stage, rather than sticking to his trading limit of $2.5m, Rusnak had secretly bet $7.5bn of AIB's money on the yen rising against the dollar. At his subsequent trial, prosecutors said he had created a false identity under the name David Russell and used an address in New York to send confirmations of false trades. Rusnak was jailed for seven-and-a-half years in a plea bargaining deal. Daiwa Bank - $1.1bn The president of Japan's Daiwa Bank received a particularly nasty shock on July 13 1995. Toshihide Iguchi, one of its senior US executives, confessed in a 30-page letter that he had lost $1.1bn through unauthorised bond trading. Like Leeson and Rusnak, Iguchi ran up the losses over several years. Having risen from the back offices to become a trader in 1984, a lack of segregation within his division meant he could hide his losses from his superiors while he tried, and failed, to trade back to profit.

Following his confession, it emerged that he had conducted the cover-up for over a decade, falsifying some 30,000 trading slips. Having once been seen as the golden boy of the department, in 1996 he was jailed for four years and fined $2.6m. In court, he told the judge that his life was filled with guilt, fear and deception after 11 years trying to recover his losses. Interviewed in jail, Iguchi said he had seen his earlier actions as merely a violation of internal rules. "I think all traders have a tendency to fall into the same trap. You always have a way of recovering the loss", he told Time magazine. Daiwa was also penalised heavily. The Federal Reserve ordered it to end all of its operations in America, leading to a sale of most of its US assets in January 2006. Sumitomo Corporation - $2.6bn Yasuo Hamanaka was jailed for eight years for fraud and forgery in 1997 after the one-time king of the copper market was found to have conducted rogue trading and fraud for more than a decade.

At the height of his power, Hamanaka was said to control 5% of the global copper market. His off-the-book trades forced prices up and generated large profits for years, but ultimately cost Sumitomo $2.6bn when the scandal was uncovered. A year after his conviction, Sumitomo paid about $150m to settle claims from British and US regulators, though it did not admit or deny allegations that it knew that Hamanaka was using bogus trades to drive the copper price higher for several years. In 1999, Merrill Lynch was fined a total of £16m for helping to finance a copper trading scandal. The London Metal Exchange said it had provided the finance to clients to undertake actions that it should have known was the basis of an attempt to manipulate the market Other huge trading losses: Although actual convictions for fraud are rare, many other traders have run up huge losses simply through a bad call on the markets. These include Brian Hunter, an energy trader at hedge fund Amaranth. He had made large profits by speculating on natural gas prices, but ended up losing $6.6bn in 2006 after betting that the price of gas would rise.

Unfortunately for him (but not for traders who took the opposite view), they plunged after a heatwave helped to slash the price of gas future contracts. In 2003 a jury ruled that Peter Young , the former Morgan Grenfell fund manager, had orchestrated a complex fraud to try and steal more than £350,000. Morgan did not face trial, after being diagnosed with an acute schizophrenic condition and repeatedly attempting self-castration. The Serious Fraud Office alleged that Young had conducted a wider fraud that had cost Deutsche Bank, which owned Morgan Grenfell, about £300m.

Topics Kweku Adoboli, a UBS investment bank trader remains in police custody amid allegations that he cost the Swiss bank £1.2bn Published: 15 Sep 2011 Shares in the Swiss bank dropped 10% after it reported 'unauthorised trading' loss – which could push it into the red Published: 15 Sep 2011 Kweku Adoboli, charming, well-spoken, had the respect of peers and a seven-figure salary in his short career in the City Published: 15 Sep 2011 Like the Société Générale rogue trader, Adoboli worked on a trading desk known as delta-one Published: 15 Sep 2011 BBC NEWS | Business | Rogue trader scandal broadens out Rogue trader scandal broadens out Jerome Kerviel, the reported rogue trader Questions have been raised over the effects on the markets of the rogue trader who lost 4.9bn euros ($7.1bn; ï¿½3.7bn) at Societe Generale. Analysts are trying to assess whether the trader's actions contributed to the stock market turmoil and the Fed decision to cut interest rates.

They also say that the losses have left the bank vulnerable to a takeover bid. While the French bank has yet to name the trader, media reports say he is 31-year-old Frenchman Jerome Kerviel. "Societe Generale will certainly lose its independence after such an operation. We will... have a redefinition of the banking world and France will be no exception," Alain Crouzat at Montsegur Finance told Le Parisien newspaper. 'Large-scale internal fraud' Maybe the government should have been told earlier Francois Fillon, French Prime Minister French Prime Minister Francois Fillon said on Friday that the French government was notified about the fraud on Wednesday, though the bank had uncovered it several days earlier. "Maybe the government should have been told earlier," he said. French President Nicolas Sarkozy called the events at Societe Generale a "large-scale internal fraud", but added that the losses "do not affect the solidity and reliability of the French system". Societe Generale chairman Daniel Bouton said the fraud was a "one-off" and denied it was a trading or risk-management fault.

The bank has filed a legal complaint against the trader accused of defrauding the bank which led to a loss of 4.9bn euros ($7.1bn; ï¿½3.7bn). 'Fuelled the nerves' 467bn euros in assets under management (as of June 2007) 22.5m customers worldwide Societe Generale share price Some analysts suggest that the rogue trader's actions might have contributed to a dramatic fall in many stock indexes earlier this week. "Something like this can aggravate the situation, but there has to be underlying concern in the first place," said Howard Archer, economist at Global Insight. "Any market that is nervous for a number of reasons is going to be touchy. And anything that adds fuel to the nerves isn't going to help," said Anthony Scott, a stockbroker at Charles Stanley. Meanwhile, a source from the US Federal Reserve said on Thursday that the Fed was not aware of the fraud at Societe Generale when it made a decision to slash interest rates at the beginning of the week.

'Apologies and regrets' Newspapers published on Friday Mr Bouton's full-page advertisements, in which he asked the bank's shareholders to accept his "apologies and deep regrets". "I understand your disappointment, your anger. This situation is perfectly unacceptable," he wrote. "I am aware of what the drop in the share price means for you," added the bank's chief executive. Societe Generale's shares, which ended the previous trading session down 4.1%, were up 2.1% in afternoon trade on Friday. They have fallen by nearly 50% in the past six months. 'Simple transactions' The bank said the fraud was based on simple transactions, but concealed by "sophisticated and varied techniques".

SOME MAJOR BANK FRAUDS 2008: Societe Generale, alleged fraud by a trader, 4.9bn euros loss 2002: former currency trader accused of hiding $691m in losses at Allfirst bank of Baltimore 1995: UK's Barings Bank collapsed after a trader Nick Leeson lost ï¿½860m ($1.28bn at the time) on futures trades The trader responsible for the fraud had "in-depth knowledge of the control procedures resulting from this former employment in the middle-office", the bank said. According to reports, Mr Kerviel worked at the bank's Delta One products team in Paris. He was responsible for betting on the markets' future performance, bank executives said. Societe Generale said the trader had taken what it called "massive fraudulent directional positions in 2007 and 2008 beyond his limited authority". Executives said the trader may not have sought personal gain from the fraudulent deals.

Scale of the fraud I never for one moment believed it would get to this degree of magnitude, this degree of loss Nick Leeson The losses are four times greater than those made by Nick Leeson, the rogue trader who brought down Barings Bank. Leeson was sentenced to six-and-a-half years in jail. Speaking to the BBC, Leeson said he was not shocked that the latest fraud had taken place - only by its scale. "I never for one moment believed it would get to this degree of magnitude, this degree of loss," he said. The bank, one of France's largest, has arranged a rights issue worth 5.5bn euros in new capital in order to offset the losses. But it said it would still make a profit of 600m to 800m euros for 2007, despite the blow to its balance sheet. Rogue Trader Costs UBS $2 Billion - Sends Stock Skidding 11% Some HTML is OK Sign me up for the Money Morning newsletter A rogue trader at UBS AG (NYSE ADR: UBS ) lost $2 billion on a series of unauthorized transactions, the bank disclosed yesterday (Thursday) despite internal risk controls designed to prevent such activity.

An employee of the London UBS desk that trades exchange-traded funds (ETFs), 31-year-old Kweku Adoboli, was arrested yesterday on suspicion of fraud. "This is a frightening level of wrongdoing in a bank that was held up as the world class example of good risk management before the [2008 financial] crisis," Chris Roebuck, a former UBS employee and a current visiting professor at Cass Business School, wrote in on efinancialnews.com . The company's stock fell 11% on the news. UBS warned that its third quarter probably would be unprofitable, although analysts say the bank – Switzerland's largest – should be able to absorb the loss. Previously UBS had forecast a profit of $1.5 billion for the third quarter. The UBS rogue trader revelation is just the latest blow to its finances and its reputation. From 2006 through 2009, the UBS investment bank division recorded $65 billion in losses, from which the bank had only recently recovered. "How many times do we have to see huge UBS losses?" Simon Maughan, head of sales and distribution at MF Global Ltd. in London told Businessweek .

"It looks unreformed, unwieldy and ultimately unsustainable. This could be a critical tipping point for UBS's strategy." Some speculated that the incident could tarnish other UBS divisions. "The key area of damage in our view is reputational and extends beyond the investment bank, into UBS's private banking business," Goldman Sachs (NYSE: GS ) said in a note to clients. Rogues Gallery The incident also brought to mind other rogue traders of the past two decades, including Jerome Kerviel, who cost French bank Societe Generale (PINK: SCGLY ) $6.7 billion in 2008, and Nick Leeson, whose $1.8 billion in losses in 1995 brought down the British Barings Bank PLC . With so many previous examples serving as a warning, not to mention its own recent history of trouble, many wondered how such a thing could have happened at UBS. "No rogue trader works in a vacuum, and UBS's management must have taken its eye off the ball to allow a trader to operate on this scale without sufficient supervision and without the systems to monitor his trades," Simon Morris, a partner at UK law firm CMS Cameron McKenna told Reuters .

Consequences of the UBS rogue trader could extend well beyond its impact on that bank. By coincidence, the Swiss parliament had scheduled a debate on the country's banking industry with an eye toward more regulation, and possibly forcing the two largest banks – UBS and Credit Suisse Group AG (NYSE ADR: CS ) to split off their investment arms to avoid a total collapse of the financial institutions. Swiss lawmakers also are considering changes that would increase capital requirements for both big banks to 19% of assets. It's in Their DNA That such incidents continue to happen raises questions about whether anything can be done to prevent them. When Societe Generale's Kerviel was in the news, Money Morning Chief Investment Strategist Keith Fitz-Gerald predicted more regulation would not deter rogue traders in the future . "Despite the fact that the world is now clamoring for more oversight and controls, we suggest that no amount of regulation will help," Fitz-Gerald wrote. For their part most of the rogue traders appear to believe they're simply doing what is expected of them – earning profits for their company. "I thought it was incredible that no one came to talk to me about this," Kerviel told a court-appointed psychologist at the time.

"My positions made money, so I told myself that it legitimized what I was doing." With pressure to juice profits creating such overwhelming incentives to break rules both internal and external, the UBS rogue trader really should have surprised no one. "Clever traders will always find ways to game the system," Fitz-Gerald observed. "Their supervisors will unwittingly encourage this behavior by maintaining the outrageous bonus structures and payouts for which Wall Street is now synonymous." News and Related Story Links: Money Morning:

Question: What is the name of the French rogue trader who lost £3.6billion on the stock market?
Answer: Jerome Kerviel